Forex, or foreign exchange, is a global market that operates 24 hours a day, five days a week. This means that traders from different parts of the world can participate in currency trading at any time of the day or night. However, not all trading hours are created equal. There are times when the market is more active and volatile than others, and there are times when it is relatively quiet and slow-moving. Knowing when to stay out of forex can be just as important as knowing when to enter a trade. In this article, we will explore the best and worst times to trade forex.
The Best Times to Trade Forex
The best time to trade forex is during the overlap of the major trading sessions. There are three major trading sessions: the Asian session, the European session, and the North American session. The Asian session starts at 9 pm GMT and ends at 8 am GMT. The European session starts at 7 am GMT and ends at 4 pm GMT. The North American session starts at noon GMT and ends at 9 pm GMT.
The overlap between the European and North American sessions is the most active and volatile time in the forex market. This is because the majority of the world’s trading volume and liquidity is concentrated during this time. The European session sees a lot of activity from financial centers such as London, Frankfurt, and Zurich, while the North American session sees a lot of activity from New York and Toronto.
During the overlap of these sessions, traders have the opportunity to trade the most popular currency pairs such as EUR/USD, USD/JPY, GBP/USD, and USD/CHF. The increased volatility and liquidity during this time make it possible to enter and exit trades quickly and at a favorable price.
The Worst Times to Trade Forex
The worst time to trade forex is during the Asian session. During this time, the market is relatively quiet and slow-moving. This is because the majority of the financial centers in the world are closed during this time. The only major financial center that is open during the Asian session is Tokyo, which accounts for only 20% of the total forex trading volume.
Traders who trade during the Asian session may find it difficult to find trading opportunities, and the market may be less predictable due to the lack of liquidity. This can make it difficult to enter and exit trades at a favorable price.
Another time to avoid trading forex is during major news releases. Economic news releases such as non-farm payroll, GDP, and interest rate decisions can cause significant volatility in the market. Traders who are not prepared for the impact of these news releases may find themselves on the wrong side of the market. It is best to wait until the news has been released and the market has stabilized before entering a trade.
In conclusion, the best time to trade forex is during the overlap of the major trading sessions. The European and North American session overlap is the most active and volatile time in the forex market, making it the best time to trade. The worst time to trade forex is during the Asian session, as the market is relatively quiet and slow-moving. Traders should also avoid trading during major news releases, as they can cause significant volatility in the market. Knowing when to stay out of forex can be just as important as knowing when to enter a trade. By understanding the best and worst times to trade forex, traders can increase their chances of success in the market.